Credit Suisse: We're Not Changing Our Morgan Stanley Targets

Credit Suisse commented on Morgan Stanley (NYSE: MS) Monday following its Q1 earnings release.

Analysts led by Christian Bolu felt the results were “solid” and “were particularly encouraged by continued signs of sales and trading market share gains and pay-off from recent years' efficiency efforts.”

Bolu estimated core EPS at close to $0.85, which was driven by trading and lower compensation costs.

Trading and principal investments were "at the high end of peers," according to Bolu. Fixed income sales and trading revenues of $1.9 billion came in "much stronger" than the Credit Suisse forecast, up 15 percent from the prior-year period and up 252 percent from the last quarter.

The results indicated that the firm “can earn/exceed its cost of capital” with a Q1 core return on equity at 10 percent. However, this understanding appeared to already be “embedded in current valuation,” according to the analysts.

The analysts raised the core 2015/2016/2017 EPS estimates from $2.89/$3.35/$3.75 to $3.21/$3.40/$3.80.

The firm held to a Neutral rating on the stock and the target price was maintained at $41, which implied the shares would trade at 1.1x the firm’s 2016 book value estimate.

“While we continue to believe franchise restoration/strength, business mix and risk reduction should drive share price performance, we see better risk/reward elsewhere in our coverage universe,” Bolu concluded.

Over the past year Morgan Stanley had risen approximately 20 percent and closed at $36.96 Monday, up 0.57 percent on the day.